Economy

New Zealand's economy has traditionally been based on a foundation of exports from its very efficient agricultural system. Leading agricultural exports include meat, dairy products, forest products, fruit and vegetables, fish, and wool. The country has substantial hydroelectric power and sizable reserves of natural gas. Leading manufacturing sectors are food processing, metal fabrication, and wood and paper products.

Since 1984, government subsidies including for agriculture have been eliminated; import regulations have been liberalized; exchange rates have been freely floated; controls on interest rates, wages, and prices have been removed; and marginal rates of taxation reduced. Tight monetary policy and major efforts to reduce the government budget deficit brought the inflation rate down from an annual rate of more than 18% in 1987.

Economic growth, which had slowed in 1997 and 1998 due to the negative effects of the Asian financial crisis and two successive years of drought, rebounded in 1999. A low New Zealand dollar, favorable weather, and high commodity prices have boosted exports, and the economy is estimated to have grown by 2.5% in 2000. Growth is likely to slow in 2001 given the economic slowdown in important export markets. 

New Zealand's economy has been helped by strong economic relations with Australia. Australia and New Zealand are partners in "Closer Economic Relations" (CER), which allows for free trade in goods and most services. Australia is now the destination of 19% of New Zealand's exports.

New Zealand welcomes and encourages foreign investment without discrimination. Restrictions and approval requirements also apply to certain investments in land and in the commercial fishing industry. 

A number of U.S. companies have subsidiary branches in New Zealand. Many operate through local agents, and some are in association in joint ventures. The American Chamber of Commerce is active in New Zealand, with its main office in Auckland and a branch committee in Wellington.